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Campbell (CPB) Slips to 52-Week Low: What's Pulling it Down?

Campbell Soup CompanyCPB hit a 52-week low of $43.50 on Feb 6, closing a notch higher at $45.14. Also, the company shares have been losing investors' confidence in a year's time due to dismal top- and bottom-line trends in the recent quarters, amid a volatile operating environment. Evidently, the stock plunged 28.8% in a year, much wider than the industry 's decline of 6.8%.

Moreover, the company's VGM Score of C indicates that troubles for this convenience food products company are not over yet.

Of late, Campbell Soup looks troubled which is well reflected in its dismal top- and bottom-line trend. With the three consecutive quarters of earnings miss, it has delivered an average negative surprise of 3.75% in the trailing four quarters. Moreover, revenues lagged estimates in the four straight quarters.

Campbell's earnings declined due to the rise in cost inflation and higher carrot costs, which have significantly hurt the performance of its Campbell Fresh (C-Fresh) division. Additionally, the rise in transportation and logistics costs due to the recent hurricanes impacted the bottom line in first-quarter fiscal 2018.

Also, sales continue to be plagued by the volatile operating environment characterized by evolving retail sector and increased competition in the food industry. The food industry is prone to changing consumers' tastes and preferences as well, which is in turn weighing on the company's overall performance.

Furthermore, Campbell's margins remain under pressure due to the aforementioned cost inflation and higher carrot costs. For fiscal 2018, the company anticipates gross margin to be comparable to last year, which is below previous expectations. This is likely to be impacted by higher transportation and logistics costs as well as the cost impact of lower carrot yields. Driven by the lowered gross margin forecast, the company projects adjusted EBIT to decline in the range of 2-4% versus earlier guidance of decrease of 1% to increase of 1%.

Not only this, the company has earlier trimmed its earnings guidance for fiscal 2018. While sales growth is expected to range from negative 2% to flat, adjusted earnings guidance is slashed to remain in the band of $2.95-$3.02 per share, representing decline in the range of 1-3%.

That said, we believe the stock is likely to display a subdued performance in the near term.

Sysco delivered an average positive earnings surprise of 1.1% in the trailing four quarters. The company has a long-term earnings growth rate of 9%.

Lamb Weston pulled off an average positive earnings surprise of 7.8% in the trailing four quarters. The stock has a long-term earnings growth rate of 12%.

MGP Ingredients delivered an average positive earnings surprise of 9.9% in the trailing four quarters. It has a long-term earnings growth rate of 15%.

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